* Telco candidate Recchi gets chairman job with 97 pct of votes
* Controversial rules give Telco 10 out of 13 board seats
* Dissident investor supports board but remains vigilant
* CEO can focus on business, may face hard choices in Brazil (Adds outcome of vote for chairman and directors, quote from investor Lombardi)
By Danilo Masoni and Stefano Rebaudo
ROZZANO, Italy April 16 (Reuters) - Telecom Italia investors on Wednesday elected Giuseppe Recchi as chairman in a board renewal that for the first time puts independent directors in charge of overseeing Italy's largest phone group.
The reshuffle, which ensured there are no executives from top shareholder Telefonica on the board, was welcomed by minority investors concerned about a possible conflict of interest because the Spanish and Italian companies operate as competitors in Brazil.
The move is also designed to help CEO Marco Patuano focus on turning around the Italian group, whose net debt of almost 27 billion euros ($37 billion) is three times core earnings.
Recchi, an ex-General Electric executive and outgoing chairman of oil group Eni, drew around 97 percent of the votes, beating out Vito Gamberale, a veteran executive proposed by dissident investor Marco Fossati because of his extensive experience in the telecoms industry.
Recchi was the candidate of Telco, the Telefonica-led group that owns 22.4 percent of the Italian company, but he has no ties with it, making him an independent chairman.
Telecom Italia's board has been dominated for years by Telco. The lack of proper representation for minority investors sparked a Fossati-led shareholder revolt last year with the aim of ousting the board.
Concerned that dissatisfaction could mount, Telco last month proposed a new board of independent figures led by Recchi.
Fossati, Telecom Italia's second-largest investor, welcomed the reshuffle saying that he would support the new team but warned he would remain vigilant.
"We have to start with a new era ... But if a conflict of interest becomes evident we will seek again to revoke the board," he said.
The new board will have a three-year term.
Italy's complex voting system for board renewals allowed Telco to get 10 board seats out of 13 in spite of having fewer votes than a rival list presented by a group of funds in a first round of polls.
None of the candidates Fossati proposed obtained a board seat, partly due to the complex voting mechanism he has criticised.
Sergio Carbonara, corporate governance expert and founder of proxy adviser Frontis Governance, said the dynamics of the vote underscored a need for reform.
By midday the turnout at the meeting was nearly 56 percent of total share capital - a record level, a Telecom Italia source said. Telco was present with its whole stake, Fossati with 5 percent and U.S. fund BlackRock Inc with 4.8 percent.
Telefonica's head Cesar Alierta and Julio Linares, a former chief operating officer at the Spanish company, resigned from the Telecom Italia board in December.
The new board will hope to tap into the recovering Italian economy, which is starting to pull clear of its worst recession in 70 years.
Under Patuano's stewardship, Telecom Italia will have to execute 2 billion euros ($2.76 billion) of planned disposals, including the sale of communications towers in Brazil and Italy, to cut debt and upgrade networks as it seeks to capture growing demand for broadband.
He may also face hard choices when it comes to the group's future strategy in Brazil, a market that is expected to consolidate and where its TIM Brasil business competes directly with Telefonica's Vivo.
Sources close to Telefonica have said that the Spanish group aims to break up TIM Brasil and share its assets among other telecoms players. Fossati has spoken against such a prospect and proposed combining TIM Brasil with broadband operator GVT, a unit of France's Vivendi.
"Dear Marco you had the merit of placating big contrasts among investors...," said Franco Lombardi, head of small investors association Asati. "For now we'll let you work quietly and wait for the results (you deliver) quarter after quarter." ($1 = 0.7234 Euros) (Writing by Danilo Masoni; Editing by John Stonestreet, David Goodman and Eric Walsh)